California utility stocks plunge on wildfire liability worries

By Rachel Layne

Updated on: November 12, 2018 / 4:14 PM
/ MoneyWatch

California wildfire forecast

Amid California's deadly wildfires, shares of two major California electric utility companies, PG&E and Edison International, sank Monday. Investors are worried the companies may be liable in the historic fires now engulfing large swaths of the state, killing at least 31 people.

PG&E fell around 14 percent in late Monday trading, bringing its two-day decline to as much as 48 percent since the Camp Fire began to burn near San Francisco last week.

Edison International lost more than one-third of its value over two trading days since the Woolsey and Hill fires broke out near Los Angeles late last week. The stock fell some 12 percent further on Monday.

The utilities could find themselves in a situation called inverse condemnation, a legal action under which the government takes private property but doesn't pay compensation, leaving the companies to sue, some analysts said.

Deadly and destructive wildfires tear across California

"Although no evidence tying either firm to the fires has been released, we think that both utility companies face significant risk under the currently expansive definition of inverse condemnation," Height Capital analysts Clayton Allen and Katie Bays wrote in a note Monday.

PG&E said in a statement it will cooperate with any investigations stemming from the massive wildfires in Northern California. The company told state regulators Thursday that it experienced a problem on an electrical transmission line near the site of the blaze minutes before the fire broke out. PG&E later saw damage to a transmission tower on the line.

Lynsey Paulo, a PG&E spokesperson, said the information was preliminary and stressed the cause of the fire has not been determined, according to a report from the Associated Press.

PG&E equipment has been involved with several deadly wildfires this year in California, racking up costs of more than $2 billion, net of insurance payments tied to those fires, according to industry publication Utility Dive. The company warned of potential liabilities tied to 2017 wildfires and the risk of inverse condemnation in its annual filing with the Securities and Exchange Commission.

Southern California Edison, a unit of Edison International serving that area, said in a statement Friday that it filed an initial report with preliminary information on the Woolsey fire with the California Public Utilities Commission. Like PG&E, the company also cited potential liability tied to last year's Southern California wildfires in its 2017 annual SEC filing.

There "has been no determination of origin or cause of either wildfire," Southern California Edison said in the statement, the latest on its website. The company added it would "fully cooperate with any investigations."